Builders in the some of the worst-ranked states for homebuilding and affordability say that onerous regulations are a major factor limiting the supply of new housing.
The Realtor.com® economic research team released its national report card on Thursday, grading each state on a combination of current housing affordability and new-construction activity.
A total of seven states received the lowest grade of F on the new report card: California, Connecticut, Hawaii, Massachusetts, New York, Oregon, and Rhode Island.
Generally speaking, these are states that combine high home price-to-income ratios with low levels of new residential construction relative to their populations. Many are well known for their strict zoning and land use regulations.
Boosting home construction in these states could be a crucial step in closing the nation’s housing supply gap, which a recent Realtor.com analysis estimated as falling short of demand by nearly 4 million units.
“We know that the housing supply gap is not evenly distributed across the country,” says Realtor.com senior economist Joel Berner.
Of the 13 A and B grades handed out on the new report card, all were to states in the South or Midwest. Meanwhile, the seven F grades on the report card all went to states in the West and Northeast.
“States that received poor grades are in danger of further exacerbating their affordability issues if they aren’t able to start building more homes,” says Berner. “Many of these low-scoring states are home to the widest supply gaps, and if they can’t build enough homes to close them, their citizens will have no choice but to find a new state where they can afford to live.”
Based on numerical score, Rhode Island ranks lowest on the report card. As the smallest state, Rhode Island might suffer from a lack of available land on which to build.
However, the second-smallest state, Delaware, ranked above the national average with a grade of C+, suggesting that land availability might not be the only issue at play in Rhode Island.
California homebuilders back new regulatory reform bill
California, a state notorious for its unaffordable housing, is the worst in the nation for its permits-to-population ratio, according to the new report card analysis
Last year, California accounted for just 6.8% of all residential permits, despite having 11.7% of the total population.
Though more housing is clearly needed in California, the Golden State is among the five least affordable states with a price-to-income ratio greater than 8. (In Ohio, the most affordable state, median home prices are less than four times median annual incomes.)
Homebuilders in California blame excessive regulations and land use restrictions, which they say raise construction costs and deter new construction.
“If California is serious about solving its housing crisis, we need a legal and regulatory system that supports—not stifles—homebuilding,” says Dan Dunmoyer, president and CEO of the California Building Industry Association. “That means [environmental regulation] reform, streamlined permitting, and more flexible land-use policies.”
The CBIA has called on state lawmakers to reform the California Environmental Quality Act, saying that it is often abused to block or delay new housing projects.
The group also advocates for streamlined permitting, reforms to “outdated and restrictive” permitting laws, and reductions to fees on builders.
CBIA says that it supports a number of reforms under consideration in the state legislature, including the Fast Track Housing Production Bill unveiled last month by Assemblymember Buffy Wicks.
Supporters of the bill say it would streamline environmental review for qualifying housing developments and remove inefficiencies at key steps in the permitting and approval process.
“We look forward to continuing our work with state and local leaders to create a more responsive, efficient, and affordable pathway to home ownership in California,” CBIA said in a statement.
New York homebuilders take aim at new wetlands protections
New York is also in dire need of regulatory reforms to encourage more homebuilding, says Michael Fazio, executive director of the New York State Builders Association.
“We need housing terribly. In this state, it’s really at a crisis point, and everybody talks about it, but we need to be doing more to address it,” he tells Realtor.com in a recent interview. “Red tape and regulations are a major impediment—that’s a major obstacle to building housing.”
Fazio says that New York’s recent move to impose the highest level of wetland protections on 1 million acres of land will put a serious damper on new construction, as much of the newly protected land is adjacent to existing suburbs with utilities connections.
In Syracuse, for example, the new restrictions have increased protected acreage by 245%, with more than 144,000 acres contiguous to the urban area falling under protected status, according to a study commissioned by NYSBA.
(NYSBA)
Excessive local zoning restrictions and lengthy permitting and review processes add to the pain for homebuilders in New York, says Fazio.
“Builders are leaving because it’s just so onerous,” he says. “They’re picking up … going to North Carolina, South Carolina, Virginia, where regulations aren’t as onerous as here.”
Still, Fazio says New York Gov. Kathy Hochul had been supportive of efforts to reform regulations on builders, but adds that the Democrat’s efforts were frequently stymied by defensive local governments.
“To her credit, Gov. Hochul has really tried to address these issues,” he says. “A lot of times, it comes from the Legislature, or it comes from these agencies, where you don’t have elected officials who may better understand the problems about affordability and the availability of new homes.”
Overall, Fazio says a multipronged approach and greater cooperation between the government and private builders will be the only way to solve the state’s housing crisis.
“We need a public-private partnership with the government,” he says. “The builders can build. We know how to build houses. They can allow us to build.”
